USDCAD meeting could cause a correction lower
USD Index – The index continues to be mixed and volatile and there is no sign that this phase is coming to an end. Trying to track a bias in the USD has been virtually impossible as it continues to hold close to or within the daily Ichimoku Cloud. The medium-term outlook remains bullish but there is nothing to say we could not have a drive lower without affecting this long-term plan.
Lots of third-tier data releases before the Bank Of Canada rate decision and statement at lunchtime.
USDCAD – After reaching the 127.2% extension level of 1.2737 (from 1.1918-1.2562) there has been little net movement in USDCAD with daily spikes seen in both direction.
Yesterday, DeMark posted an intraday exhaustion count and the initial rally was sold into with the two, four and six-hour charts all posting bearish Outside Bars.
The one-hour charts looks to be forming a ‘diamond’ pattern that, after appearing after a rally, has a bias to break higher. However, there is ample scope for a larger correction without affecting the overall medium-term bullish bias.
An inside Head and Shoulders looks to be forming. Selling into the right shoulder close to 1.2780 offers the best risk/reward but is also the riskier trade. Selling a break of the neckline at 1.2720 and the measured move target is 1.2640
USDCAD steadily rising since mid-June
Management and risk description
Entry: Looking to sell at 1.2780 (before Bank of Canada rate decision) or a break of 1.2720.
Stop: 30 pips from entry.
Time horizon: intraday.
— Edited by Martin O'Rourke
Non-independent investment research disclaimer applies. Read more